The growth of international trade over the last few decades has led to the creation of regional trade agreements like the North American Free Trade Agreement (NAFTA) or the European Union (EU). However, each cross-border transaction can involve complex tariffs and duties, cumbersome documentation requirements, and changing legal regulations for each new locality. Therefore, international trade presents both business opportunities and business-oriented technological challenges.
The pressure to minimize costs has led to product sourcing going global and represents one of the driving forces behind increased international trade. The reliance on global resources introduces additional possibilities for implementing automated systems that provide increased efficiency in varied import-export scenarios. One area that can benefit from a higher degree of automation is trade preference processing. Trade preferences are usually elements of regional trade agreements that grant preferential customs treatment for goods from certain countries and geographical areas or for goods of certain types. Trade preferences allow exporters and importers to take advantage of reduced or zero import duties which increases the competitiveness of goods for sale because the customer has to pay less customs duties.
For example, if goods are exported from a member state of a first regional trade agreement to another member state of the regional trade agreement or to a member state of a second regional trade agreement which includes trade preferences for goods originating from member states of the first trade agreement then the exported goods may incur reduced customs duties if the exporter can demonstrate that the goods originate from a member state of the first regional trade agreement. As a consequence of such trade preferences, businesses may need to determine and certify the origin of the goods they import or export.
The origin of goods such as raw materials may be easy to establish, however this is not the case for manufactured goods. Such goods may consist of a large number of individual parts originating from various vendors in different regions. In order to determine whether such goods are eligible for trade preferences or not, it may be necessary to examine the origin of each individual part. The manufacturer of the good may request so-called vendor declarations from the vendors that deliver the individual parts in order to establish the origin of each individual part. A vendor declaration is a document that certifies that one or more parts delivered by a particular vendor originate from a particular region (or, in the alternative, that the parts are of a certain type) such as NAFTA or the EU. By evaluating the vendor declarations for each of the individual parts of a manufactured good, the manufacturer may determine whether or not the good will be eligible for trade preferences.
The concept is simple—import duty rates vary depending on what percentage of the manufactured good originates in the sending country. In practice, however, trade preference processing can be highly complex and time-consuming—each business must have written declarations from its suppliers as to the composition of the components and subassemblies of their manufactured goods. Trade preference processing according to the framework described herein can help automate this entire process.